Tesla turning to Samsung SDI for batteries, Panasonic pumps up the volume

Tesla Motors has, over its short life, sourced its batteries pretty much exclusively from Panasonic. Now that sales of the Model S are blowing up – expected to be in excess of 21,000 units this year, with production ability increasing to potentially double that – and the company's future product path is becoming moreclear, it seems time to diversify its battery supply lines.

Tesla may eventually need more lithium cells than the entire laptop industry.

The automaker may eventually have a need for more lithium cells than the entire laptop industry and finds itself one earthquake (or other natural disaster) away from a huge production disruption. If previous rumors and an unidentified "source close to the matter" used by The Korea Herald for a recent report are to be believed, Samsung SDI will be the first to offer an alternative to Tesla's traditional Japanese supplier. It currently makes the cells for the BMW i3, the Fiat 500e and is said to have a contract with Volkswagen.

The deal is yet to be finalized, with testing still ongoing. According to the report, LG Chem was also in the running but was beat out by its Korean competitor and Chinese battery maker BYD may be working out its own deal.

For its part, Panasonic is not sitting still. Earlier this month, it was reported that the Japanese company is increasing its production of automobile-specific lithium cells, with two separate facilities in Osaka Prefecture coming online in 2014 to boost output. Battery sales are becoming increasingly important to the company's bottom line, adding 4.1 billion yen ($41.66 million US at today's rates) to its balance sheet last quarter.

Besides dealing with the diversification issue, we expect increased competition for Tesla's high-energy capacity, 18650-format battery business should spur lower prices and improve the technology.

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Production facilities for batteries in ever larger volumes, don't just exist sitting idle. Money has to be invested, and plans have to be made there are no magic wands to do business. No one expected TSLA to raise production this quickly, and this is part of the reason it will take so long to have large amounts of EVs all over the world, is the supply chain isn't the same as what it is for an ICE car. I think the true genius of their business model, is that they are using commodity Li-ion batteries, from laptops, making minor changes and selling it as a huge premium product. As the tech in the commodity improves, so does their cars without all the costly investment. They can focus on what they do best, making great cars. Everyone else, is using large form factor batteries that are having to be invented from the ground up. That is so much more expensive and that is why TSLA has such a huge cost advantage.

The large form factor batteries are more expensive in regards to the capital expenditures needed for bringing on capacity, as the 18650 was a commercially available form already, however once installed and brought up to production capacity, there is nothing intrisically more expensive about the large formats. In fact over time they will integral to lowering costs. However, that is not to say that Tesla was wrong in choosing 18650, since it allowed them to focus on other stuff and it made them less susceptible to the success or failure of a single battery vendor, which you can see isn't helping fisker. Yet, I think eventually, Tesla will shift to the larger form factors because those will too become standard production items as with the 18650s, possibly in the mass market car. They just need to know that they aren't trapped with some marginal battery company.

Umm, actually, elon has said that getting good yields on electrodes gets harder with larger areas. Just like in semiconductors, making a 100 mm2 die is harder than making 10 x 10mm2 dies. A defect will make the whole 100m2 die unusable, while the same defect will still leave 8 or 9 10 mm2 dies intact.

@SublimeKnight They are approaching the supply limit because they essentially have only one supplier right now. Which is why they are looking for others. Even if they build their own factories, there's not guarantee they will not run into the same limits. It's just right now the third parties have to invest in expanding their factories, rather than Tesla.

Anonymous

1 Year Ago

I think its more a fact of being single sourced brings risk to the table. Say a large earthquake takes out Osaka. They would be in rough shape if the Panasonic plant was damaged. What I don't understand is why they don't lease some of their 1 million square foot facility to Panasonic and have the batteries made on site. Other that its California and the regulations on Lithium exposure and clean up could be over the top.

Tesla has an enormous factory and patents for low cost assembly of 18650 cells (by removing parts they don't need). Why not focus on sourcing battery parts (anodes and cathodes) and construct them themselves?

This is smart, diversification will help spread out the risk. But why stop at just 2 suppliers? I'd try for more than that. And it might make sense to try to get ownership stakes in the suppliers by trading stock. At this point they'd get an outstanding return so to speak with the stock so high but they need to realize that their battery suppliers are going to get very popular due to this certain, huge and new need for the product. I'd rather do that than sit on Tesla stock exclusively if I could. But it would be easier to get the companies to make the exact changes required by Tesla if they had an ownership stake as well as being a major customer. But that may not be possible or even a potential problem, I don't really know. But it sounds like Tesla and battery makers are getting the factories online to ramp up production to the levels that are predicted to be needed for a couple years out. So the FUD about the world being unable to produce the batteries Tesla will soon need is obviously done without any knowledge of the way the businesses are actually operating now and the relevant plans for the future.

Hopefully the new batteries are as good as the ones they are currently getting from Panasonic. Otherwise this is smart business strategy. Even if Tesla doesn't buy a lot from the other manufacturers, it is still good for them to have a working relationship on the off chance that one of them comes up with a critical technology breakthrough.

Fake story to get free press for Samsung like they did for Panasonic, Lotus and Fisker which were sinking after Tesla Motors success which should tell you: If there was a real connection, high tide lifts all ships.

Anonymous

You are so stupid. Period. All of the American tax dollars were already paid back by Tesla. Read the news before posting bullish posts. And by the way, I'n not American, I'm European, and heck... I would love to see Tesla moving to Europe... you can bet we would love the company far more than you do.